KeyCorp (KEY) Poised for Revenue Growth Despite Higher Costs

KeyCorp KEY remains well positioned for top-line growth, supported by continued rise in loans and deposits along with higher interest rates. Given a solid capital position, the company is expected to continue enhancing shareholder value through efficient capital deployment activities.

However, KeyCorp’s significant exposure to risky loan portfolios might curb its growth in the near term. Moreover, elevated expenses are likely to hurt bottom-line growth.

Thus, the company’s Zacks Consensus Estimate for current-year earnings has remained stable over the past 60 days.

Going by the fundamentals, the company’s revenues have increased at a CAGR of 15.3% over the last four years (2014-2017). Moreover, continued rise in loans and deposits, along with lesser regulations, are expected to continue supporting top-line growth in the quarters ahead.

The company is well poised to benefit from the improvement in the rate scenario. Subsequent to the latest Fed rate hike, the company raised its prime lending rate from 5.00% to 5.25%.

However, the company continues to have significant exposure to home equity and commercial real estate loans. Despite an improvement in the housing sector, it is likely to pose some challenges for KeyCorp in the near term.

Further, increasing expenses remain a major concern for the company. Total operating expenses have witnessed a five-year (2013-2017) CAGR of 9.9%, mainly due to rise in personal expenses. Given the company’s investment in franchise and inorganic growth plans, expenses are likely to remain elevated in the near term.

A few other stocks from the same space are Comerica Incorporated CMA, BB&T Corporation BBT and Bank of America Corporation BAC.

Over the past 60 days, Comerica’s Zacks Consensus Estimate for current-year earnings has remained stable. Its share price increased more than 17% in the last 12 months.

BB&T’s earnings estimates for the current year have remained stable over the past 60 days. Its shares gained nearly 3% in the last 12 months.

Over the past 30 days, Bank of America’s earnings estimates for the current year remained unchanged. Its share price increased more than 13% in a year’s time.

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